California’s Changes to Prevailing-Wage Law Upheld

SAN DIEGO (CN) – A federal judge has dismissed a lawsuit by a lobbyist for nonunionized construction groups challenging a California wage law the groups claim was a political decision to take away benefits from open-shop employers.

U.S. District Judge Roger Benitez on Jan. 27 dismissed the lawsuit brought by Associated Builders and Contractors of California Cooperation Committee and Interpipe Contracting against Attorney General Xavier Becerra, Labor Commissioner Julie Su and Department of Industrial Relations director Christine Baker. He also denied the lobbyist’s request for preliminary injunction.

Associated Builders raised questions about the constitutionality of Senate Bill 954, an 2016 amendment of state wage law which represents an ongoing fight between unions and open shops.

Beginning Jan. 1, only employers who make payments to an “industry advancement fund” as required by a collective bargaining agreement can receive a prevailing wage credit through a state subsidy. Those employers who pay into industry advancement funds that lobby on behalf of the construction industry but aren’t required by a union contract can no longer receive the credit.

Proponents of the bill said it protects construction workers on public works projects from having a portion of their wages used for industry advancement organizations – construction lobbyist groups – which may promote causes against workers’ own interests, such as fighting to reduce workers’ wages.

But Associated Builders and other opponents claimed the amendment discriminates against non-union workers by banning the groups from using the money they pay to industry advancement funds.

Associated Builders is one such group that claimed it would incur financial damages and see its free speech rights chilled by the new law. It included declarations and attachments from 11 employers, including Interpipe, which said they would cease making contributions to the fund as of Jan. 1, because of the loss of the prevailing wage credit.

About 85 percent of construction workers are non-union, according to Associated Builders.

The plaintiffs claimed the statute is preempted by the National Labor Relations Act under the Supremacy Clause of the U.S. Constitution. Associated Builders also claimed SB 954 violates its First Amendment rights and equal protection rights.

Benitez found Associated Builders did not have standing to bring its equal protection claim because SB 954 does not discriminate against industry advancement funds, but rather penalizes employers who don’t comply with the law.

As for preemption under the National Labor Relations Act, Associated Builders argued states are barred from regulating business that should be “controlled by the free play of economic forces,” including legislation that attempts to influence the terms of collective bargaining agreements.

But state labor laws unrelated to the process of collective bargaining are not preempted, Benitez wrote, since they affect union and non-union employees equally.

The attorney general argued SB 954 establishes a minimum labor standard and provides opt-outs for employers subject to a collective bargaining agreement. But Associated Builders argued even if SB 954 is a minimum labor standard that does not save it from preemption.

The judge found the plaintiffs interpreted the free speech preemptions under the National Labor Relations Act too broadly.

“The NLRA protects the rights of employers and employees to engage in open debate about labor disputes. Such speech is the type of speech that Congress intended to leave unregulated. It goes too far to say that Congress intended to leave unregulated a third party’s speech to the general public and government agencies,” Benitez wrote, noting “it seems quite simple to comply with the law”

SB 954 does not establish compliance burdens or litigation risks that pressure plaintiffs to forgo their free speech rights in exchange for the receipt of state funds, the judge added. This case is not an “extreme situation” compared to other cases on preemption which “virtually dictate the results of collective bargaining,” Benitez wrote.

The judge added that while the law may “alter the backdrop” of labor management negotiations, it doesn’t affect the collective bargaining process.

As for Associated Builders’ claim the law infringes its First Amendment rights, the group claimed the statute burdens the ability of industry lobbyists with a pro-open shop perspective to fund their political activity. It therefore restricts speech based on speaker and viewpoint, which Associated Builders said is discrimination.

But Benitez found that argument fails because the statute “says nothing about particular speakers or viewpoints.” He also found Associated Builders’ assumption it will not receive contributions from employers who are now precluded from receiving prevailing wage credits from the state subsidy to be speculative, noting that employees and employers can independently contribute to the lobbyist fund.

In fact, the judge said the law may actually help open-shop employers hire better workers, though the economic effects of the statute are ultimately unknown.

Benitez also rejected Associated Builders’ characterization of the statute’s “true purpose” as a politically motivated move by a Legislature intent on discouraging open-shop, non-unionized advocacy, finding the claim “implausible.”

“The legislative history reveals that the Legislature was concerned about employers ‘crediting industry advancement fund payments toward their prevailing wage obligation without the input or consent of the employees or their labor representatives,” Benitez wrote.

Associated Builders is represented by David Wolds in San Diego, who did not return a phone request for comment. A spokeswoman with the Attorney General’s office did not return an email request for comment.